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CEO Matthias Mueller took over in the days following the outbreak of the diesel crisis in September 2015, after Dr. Martin Winterkorn resigned. Photo by Autoweek

VW corporate culture will take time to change, HR head Blessing says

Report: Diesel crisis may not be forcing VW to ditch ingrained management habits

April 3, 2017

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There is no denying the fact that Volkswagen is weathering the 18-month-old diesel crisis well, at least on paper. Last month the automaker reported a record total of 10.3 million cars delivered across all brands, posting financial results that will help it recover from the expenditure of at least $24 billion that has been devoted to the fallout from the diesel crisis over the course of several years. Strong sales seem to be quieting market doubts about VW's ability to bounce back from the crisis, and taken together with a pivot to electric vehicles the automaker appears to have turned a corner, as decade-old GM mea culpas used to say.

But even after swearing off diesel in the U.S. and getting electric religion, is the corporate culture of the automaker actually changing?

In an interview with Reuters, VW's head of human resources Karlheinz Blessing says that this type of change will take time, as it requires alterations to a corporate structure that has remained relatively unchanged for decades.

The HR chief indicated that the company was making internal changes to streamline the development of new models, reduce the number of committees and move managers around more frequently to foster their leadership skills. But at the same time, Blessing's comments suggested caution regarding the pace with which VW's top-down management style was changing, or rather not changing.

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VW's top leadership has traditionally been viewed as closed-off -- something widely seen as having contributed to an environment where the creation of secret emissions software was possible -- and at the same time subject to too many stakeholders including unusually powerful trade unions. The former problem is not unique among the ranks of multi-billion dollar global companies, and industry analysts also note the strong role of Volkswagen's ruling families has not helped the company's leadership style become more egalitarian.

Famous for periodic power struggles as well as top management who had been groomed within the company for decades, current CEO Matthias Mueller included, VW's traditional corporate culture was on display during the last two months as ousted CEO Ferdinand Piech leveled accusations against other former executives of having ignored his warnings of an impending scandal relating to diesel emissions. Piech's claims, depending on their degree of accuracy, only highlighted the fact that VW was still subject to feuds between powerful longtime stakeholders, while former CEO Martin Winterkorn's testimony before a German parliamentary inquiry in which he denied knowing about the diesel scandal until a few weeks prior to its publicity reinforced views of an isolated, hear-no-evil top leadership.

VW's corporate culture was also on display earlier last month as Audi CEO Rupert Stadler, taking questions from reporters, dodged questions about raids in Audi offices and its law firm days earlier, at the same time reiterating that the company is cooperating with authorities and that he is interested in clearing up the matter. Stadler reportedly seemed irritated at times during the lengthy press conference, especially when asked why he didn't take responsibilty for the diesel crisis in the same manner Winterkorn did -- resigning as the diesel cheating happened on his watch.

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Audi's top management reminded the press during the conference attended by Automotive News Europe that the company's development chiefs Ulrich Hackenberg and Stefan Knirsch had been fired in the weeks following the outbreak of the crisis, reinforcing the view that the automaker was still more interested in punishing those responsible than addressing the management environment that made such transgressions possible in the first place.

This characteristic of VW's corporate culture is viewed one of the most deep-seated, and not only continued to be apparent in the months following the outbreak of the crisis but appeared to have survived in the year and a half since the crisis broke. The quick suspension and dismissal of those believed responsible, coupled with repeated claims that top management was isolated from their plot, only strengthened the impression that VW was more interested in finding and firing those responsible while insulating the top leadership.

VW's stated defense throughout the crisis has also been seen as implying that the top leadership was not only completely unaware of their subordinates' efforts, but was not interested in the details of the too-good-to-be-true Clean Diesel engine range. The defensive testimony of some executives, namely former CEO Winterkorn, seemed to confirm that multiple signals about discrepancies were not seen until weeks before the EPA went public with knowledge of defeat devices in hundreds of thousands of TDI vehicles.

Change for Volkswagen will certainly take more time than the effort to rid itself of engineers thought responsible for the diesel cheating efforts, though some fear that by the time corporate culture truly experiences change VW may be a maker of electric vehicles that at one distant point in its history fielded internal combustion cars.